Market dump, Fantom yields pump

FantomFantom
$0.35319
1.69%
loiynes.medium.com4m ago

The crypto market took a massive dump today as anyone reading this article would probably be well aware of by now, but the Fantom ecosystem is as lively as ever. Coincidentally, we had the launch of 0xDAO today, an attempt to take back liquidity from veDAO. This ongoing liquidity war, a side effect of Andre Cronje’s ve(3,3) NFT airdrop, has been causing massive waves in yield figures across the Fantom ecosystem. Liquidity has been moving from platform to platform and as a result, yield figures and borrowing rates are also shifting. If you have any such positions or are considering making a position having bought the dip, pay attention.

0xDAO yields

0xDAO just launched and we’re seeing relatively competitive yield rates from their token emissions. Bear in mind the token supply is increasing at a rapid rate with every block so as OXD tokens are being farmed as rewards, their supply is also undergoing massive inflation at the same time. This is degen-level yield.

5 hours since Launch

Since the reward allocated per pool is fixed, as more liquidity is staked in the farm, yield APR declines. At the time of typing this article, it’s been 5 hours since launch but yield APRs are still in the thousands of %.

It’s worth mentioning that 0xDAO implemented a migration feature to make it convenient for existing users with veDAO positions to migrate over their liquidity. A reddit user pointed out to me that you can check veDAO yield figures here: https://vfat.tools/fantom/weve/

Understandably, yield hunting degens may make the migration at least for now until 0xDAO yield declines and stabilises.

Self-inflicted Vampire Attack or liquidity exiting?

Interestingly, we’re also seeing liquidity shift from protocols on good terms with 0xDAO to 0xDAO, no doubt due to degens chasing higher yields. This provides an opportunity for more conservative DeFi investors as these previously established protocols now have less competition for the same rewards, increasing yield on their platforms. Another possibility for liquidity on these protocols dropping could be due to the bearish market conditions which have led investors to pull out and close their positions, this is common across all chains. This will have a similar effect where there’s less competition for yield rewards. I want to try to list some of these examples that have caught my eye.

Scream

The WFTM pool was already high to begin with, previously offering yields of 30ish %. https://twitter.com/Screamdotsh/status/1484208538683641859?s=20

I can only imagine that APY has risen because some of this staked WFTM has moved over to 0xDAO.

Investors seeking stable FTM yield can consider this as a relatively safe option. On the other hand, borrowers who have not returned their WFTM will likely face liquidations on their previously deposited collateral positions if they remain unaware.

Tarot + Tomb Finance

Another interesting play has been on Tarot.

Tarot is a platform for Leveraged LP positions, and it functions by borrowing more of each token to create more LPs, allowing users to leverage up on their yield farmed at the risk of getting liquidated due to high price volatility. Lending TOMB now yields 400% APR, previously this was around 60%. TOMB is a loosely algo-pegged stablecoin to FTM.

Typically, a large share of the TOMB supplied on Tarot is done by the Tomb Finance DAO treasury. This allows the treasury to farm more TOMB without having to sell off their TOMB holdings. This also benefits users as it gives them access to lower borrow rates when they leverage up. But here you can see them withdraw this liquidity as they intend to participate in 0xDAO’s high initial token emissions:

DAO wallet: https://ftmscan.com/address/0x02517411F32ac2481753aD3045cA19D58e448A01#tokentxns

Here’s the tx hash where they deposit 3 million TOMB into 0xDAO’s TOMB pool: https://ftmscan.com/tx/0x321d98d599e6507888b6b27f78c433bfaba301e61e0487aba81bf6b313d6eb76

With the high yields for single staking TOMB on 0xDAO and Tarot, TOMB has seen a bit of a price recovery:

Something to also consider is that the TOMB yield in Tarot at a utilisation rate of over 90% is unsustainable. I’d expect users with leveraged positions to reduce leverage and possibly break LPs to stake TOMB instead, but with the DAO having withdrawn liquidity, I’d expect Tomb supply APR to continue to remain fairly high above 100% APR. Also consider that TOMB is above 3% above peg, so factor this potential loss into your farming and decide for yourself how long you may need to breakeven.

Edit: Just for the record, I was wrong, TOMB supply APR on Tarot has dropped to 87% following massive deleveraging. Price of Tomb has also fallen back to peg or at least roughly around peg.

I don’t know how long this will last, but at the very least, this also means the Tomb Masonry will start minting TOMB again, so TSHAREs in the Masonry can start to generate yield again. Just bear in mind that Tomb Finance still has unpaid debt to previous TBond holders.

So, expect Masonry APR to hover around the 200–300% range for roughly the next 4 days assuming TWAP remains above peg.